Market Insider: Wednesday Look Ahead

Stocks are stuck in the bear market's tight grip and just can't shake loose, even for seemingly good news.

"The market will feel bad until it's not bad. I think that's the phase we're in. We went through the phase where everything looked cheap. That didn't work out so now we're in the phase of: 'I'm not going to buy it because I want to see the news first,'" said Robert Harrington of UBS.

Even with good news Tuesday, the market rallied, then sold off going into the closing bell as economic worries won out. Stocks had been moving up around the Federal Housing Finance Agency's announcement of a new plan to renegotiate hundreds of thousands of delinquent mortgage loans held by Fannie Mae and Freddie Mac. The plan comes as major banks work to renegotiate troubled loans in their own portfolios.

Stocks staged a midday rally, with the Dow recovering to near breakeven from a decline of about 300 points. Traders said the FHFA plan was perceived as a positive because it would help the beaten down housing market and stave off more foreclosures. But the rally was short lived, and the Dow fell 176 to close at 8693, a decline of about 2 percent. The S&P 500 fell 20 or 2.2 percent to 898.95.

"The credit market is liquid because of the Fed and central banks, but we really haven't crossed over into that world of confidence again and we may not for a long time," said Harrington, head of block trading at UBS.

On Wednesday, investors will get earnings from Macy's ahead of the bell. Investors may also focus on late Tuesday comments from Goldman Sachs CEO Lloyd Blankfein who said the company plans to focus on its strategy and that it is well positioned to deal with the current environment.

There is no significant economic data Wednesday, but there are several speeches worth watching.

How TARP funds will be used has been a big topic of interest as traders try to game which companies will receive funds and what the government aid will do in terms of fixing the broken economy and credit markets.

"We never threw money at a situation like this before so reading the tea leaves is not so easy," Harrington said.

Other speakers Wednesday include Fed Vice Chairman Donald Kohn who speaks in Luxembourg at 11 a.m. on productivity and innovation in financial services. Minneapolis Fed President Gary Stern speaks to the Minnesota Women's Economic Roundtable at 1 p.m.

The House Financial Services committee will hold a hearing on private sector cooperation with mortgage modifications, which will be attended by executives form Bank of America and J.P. Morgan.

Oil Drill

In Tuesday trading, materials and energy stocks were the worst performers, down 4 and 3 percent respectively. The dollar gained 1.68 percent against the euro, taking it to $1.2528 per euro.

Crude oil on the NYMEX fell $3.08 per barrel, or nearly 5 percent, to $59.33, the lowest close since March, 2007. RBOB gasoline futures fell 4.5 percent to $1.3059.

CNBC.com

There's a silver lining for consumers now that gasoline nationally averages $2.22 per gallon at the pump. CNBC's Sharon Epperson reports that the average in four states is actually below $2 per gallon, and in the city of Des Moines, it averages $1.78 per gallon.

"The gasoline futures market actually sets the prices at the pump more than oil, and we have the RBOB gasoline futures contract at its lowest level since its inception in 2005. It could go from $1.30 per gallon down to $1.20," she said. For consumers, "we could see the national average at the pump very close to $2 per gallon."